There are a lot of great places you could put $500 into the stock market right now, including a handful of artificial intelligence stocks that could have more room to run. But if you're looking for diversification -- or don't want the roller-coaster ride some tech stocks are on right now -- then buying an S&P 500 exchange-traded fund (ETF) is a great option.
One of the best S&P 500 ETFs and most popular is the Vanguard S&P 500 ETF (VOO 0.56%). One share costs a little over $600 right now, but you can easily invest $500 with fractional investing through most brokerage accounts. Here's why that's a smart idea right now.
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A strong track record and low costs
If you're a seasoned investor, you've likely already learned that there are no guarantees when you invest. Sometimes your instincts pay off, and sometimes they don't.
The benefit of investing in a fund that tracks the entire S&P 500 is that you don't have to rely on your instincts or hours of combing through investment research. With 500 publicly traded companies in the fund spanning sectors including energy, technology, consumer goods, industrials, and more, you'll be well diversified.
The Vanguard S&P 500 ETF launched in 2010 and since its inception it's had a historic average annual return of 14.8%. That doesn't mean you're guaranteed to earn returns in any given year, or that you'll earn anything, but it's a good indicator that when the market as a whole performs well, this Vanguard ETF will too.
What's more, the fund charges an annual expense ratio of just 0.03%, which is far lower than the average annual S&P 500 index fund fee of 0.41%. So, for every $1,000 you have invested in Vanguard's S&P 500 ETF, you'll pay just $0.30 annually.
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Key Data Points
The market could be volatile for a while
Another good reason to put $500 into the Vanguard S&P 500 ETF right now is that the market could be volatile for a while, which will make picking winners and losers significantly more difficult.
Case and point is the latest back-and-forth on tariffs. The U.S. Supreme Court recently struck down President Donald Trump's tariffs, which caused uncertainty among many publicly traded companies. Companies are trying to figure out if they'll be reimbursed for past tariffs they've paid, and Trump has made this even more complicated by announcing new tariffs under different laws.
This is happening as investors try to figure out which companies, sectors, and jobs may be affected by artificial intelligence. When you add it all up, there's a lot of uncertainty in the market right now. You won't be able to fully avoid the uncertainty by owning the Vanguard S&P 500 ETF, but you'll likely sleep better at night knowing that no matter which companies and parts of the economy grow, you'll own a slice of the growth.
